Div 43 Reducing the Costbase - How much ?

Discussion in 'Accounting & Tax' started by Paul@PAS, 18th Dec, 2019.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Capital allowance deductions claimed erode the costbase resulting in a reduced costbase at the time the asset is sold. Therefore a higher capital gain, that is then subject to a 50% discount.

    But what happens when the former owner MAY have claimed Div 43. How does this impact the calculation ?

    Lets say that Darth has purchased the Deathstar from Dr Evil in 1990. Dr Evil was asked for a copy of his quantity surveyor report but never did provide one despite admitting he had one. So Darth obtained one from BMT. s262A (4AJA) of the 1936 Tax Act REQUIRES that the previous owner is required to produce a notice within 6 months which includes the undeducted Div 43 remaining if they had previously deducted an amount.

    But, Darth didnt receive a report from Dr Evil after many requests. As far as Darth is aware Dr Evil is no longer in Australia. Fortunately, PSLA 2006/1 (GA) is an ATO administrative Practice Statement that considers that Darth's difficulty in obtaining Dr Evils tax information is a burden and sometimes isnt given. So there is no need to do so. Darth is able to reply on the BMT report instead for the amount of undeducted Div 43 at the time of acquisition and the annual amount tha may be deducted and then use that information to reduce the costbase at the time of sale.
     
  2. Hamish Blair

    Hamish Blair Well-Known Member

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    Important when you are depreciating assets in the Death Star cafe.
     
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  3. datto

    datto Well-Known Member

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    Interesting. But I would have preferred the use of Bart, Homer and Flanders if possible.
     
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  4. Mike A

    Mike A Well-Known Member

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    @Paul@PFI would the result be the same if ned built a church in his backyard
     
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